SaaS Interviews with CEOs, Startups, Founders
1383 Treehouse Moves from $24m ARR B2C SaaS to B2B Helping Companies Scale Dev Teams
08 May 2019
Chapter 1: What is Treehouse and how has it evolved since its inception?
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This is coming from a guy who literally eight months ago, it's like a black t-shirt and now he's a full-fledged sales. I mean, pockets, hold your wrist up. Is there a watch on too? No, no, no. No watch yet. Okay. So he's not a full sales guy yet, but he's a fitted suit though. A fitted suit with the pocket square.
Look, his consumer business, 2 million bucks in ARR, 24 million, sorry, 24 million in ARR. He's letting that glide because he sees the opportunity to change more lives, help more companies, get developers up to speed, train them, you know, bringing their new classes faster on their B2B model. These are, you know, $90,000 ACV deals.
helping MailChimp, you know, folks like this and Vision bring on new developers. The economics are making sense. He did it himself. And, you know, onboarding a new sales rep takes about six months, hoping to hit about a million bucks in new ARR per rep. That would be good. Structure is, you know, 50% base, 50% commission.
So they are scaling, hoping that the B2B side passes 4 million bucks in ARR this year and hopefully grows larger than the consumer side by 2020. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn.
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million.
I had no money when I started the company. It was $160 million, which is the size of many IPOs.
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Chapter 2: Why did Treehouse shift focus from B2C to B2B?
So you were 80 people last time you were on the show. What are you at today and what portion of those are sales?
So, you know, what's funny is I actually began to run the sales team. So the restructuring was the CEO came in and figured out how to do sales. And it's a long story. I know this is not a long-form podcast, but man, it was a wild ride. Going from doing zero sales myself to doing potentially millions of dollars of sales myself this year and learning how to do that and learning how to run the team.
So essentially... I came in, I said, you know what, folks, we're going to do this and I'm going to directly support you as a CEO and we're going to build out this team. So we've actually grown the sales team and brought on SDRs and brought on new customer success. And it's been fun. So total team today is how many employees? Still 80. Still 80, okay, great.
What we did is a couple folks left and then we brought on more people on sales. And so it ended up being the same, but the team was slightly changed to be more focused on sales.
So let me ask you a couple questions, right? So for other people listening, thinking about launching their own inside sales teams, they're right now for the next board meeting, thinking about what does the pro forma look like for onboarding a new sales rep? What's ramp up time? What should quota be? You know, things like that. Have you figured that stuff out yet?
Yes, but here's what I'd say. If you haven't built the sales team yet and you are the founder CEO, you should be doing sales. So that's the first thing you got to do. Do not try to hire people. Do not try to do SDR. Don't do any of that. Go out and sell. and learn the sales cycle yourself. And then you'll know, okay, someone should be able to ramp in three months, you know.
Well, what premium do you put on you for being a CEO, right? So people say, well, if you close it in three months, you got to triple that for someone to bring it off the street, right? Yep, yep.
It's probably double. Okay. So there is a huge premium of being CEO. But at the same time, it gives you real data. What are people saying yes to? What are they saying no to? I mean, this is how we raised our ACV from $1,800 to $90,000, right? is by me getting in the dirt and figuring out what actually is valuable.
Yep. That's interesting. Okay. So just real quick to close out the sales conversation, what is it today? So what ramp do you project for most, like a new salesperson you're onboarding? Six months? Three months. Three months. And by at that point, you want them hitting about what kind of quota?
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Chapter 3: How does Treehouse create talent for businesses?
Never raise money, you know, when you're desperate for it, you know, raise money when you just don't need it. And, um, I mean, I have tons of inbound thankfully. And, but I'm just saying, no, we just want to focus on building, uh, the core business and making it repeatable.
Yep. Let me ask you a question. Let's assume you keep doing what you're doing from a founder perspective. Um, how do you create personal wealth for yourself and for your team? Do you eventually move to like a profit sharing plan or something? The reason I ask is last time you were on the show as a black t-shirt. Now you've got a suit jacket and a pocket square. So something's changing.
That's great.
You spotted that.
Now I see. This is how I know you're head of sales now. You go from a black t-shirt to now he's got a pocket square on the jacket. He's definitely head of sales now.
Yeah. It's so funny. You know, I realized, hey, people like buying from people that look nice.
Listen, the number one role of a CEO in my opinion is to really be a chameleon, right? And you've got to adapt to any role you put in.
Yes. Yep. So there we go. That's my... And you know, I enjoy it. I
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Chapter 4: What challenges did Treehouse face during its transition to B2B?
What I realized is sales is not at all what I thought it was. It's helping people solve a problem. So when we close a deal, they're cheering about it because we're solving a problem. And that makes me so happy. It's a ton of fun.
Back to my question, though.
Chapter 5: What is the structure of Treehouse's sales team and how has it changed?
So let's assume you never raised capital again. So, like, by the way, like a Weber does this, I think, really nicely. Tom's getting up there. Right. But and I asked him the same question.
And so the way that, you know, if you're not going to create wealth for yourself and for early investors and early, you know, employees that took equity grants, a great way to sort of reward them if you're not going to raise capital or IPO or sell is just to like profit sharing. So do you see yourself ever moving to that kind of model or no?
I would love to give liquidity to any shareholders right now eventually and say, you know what, I can find new investors to buy your shares.
Why wouldn't you just do like a stock, essentially private version of a stock buyback using the cash you throw off?
We could. So we're not throwing off enough cash to do that right now. So I think we'll be in a spot eventually where that happens. But meanwhile, you know, the company is growing so fast. I know I can go find other private investors to give liquidity to early shareholders. And that means employees, right? And then early investors. So
I personally don't intend to create a large amount of wealth for myself. I plan to hold my stock inevitably. And that's just kind of where I'm at. I want to build a long-term, sustainable company.
yeah i appreciate the answer ryan but i mean you hold stock because at one point you hope this baby you've matured yeah right this is like this is like are you do you have kids i forget i do too how old's oldest one 10 this is like you know what does it cost like five grand a month to have a baby and like feed them and like do diapers and like all this crap you're making this investment so that when you're old and can't take care of yourself they can take care of you right that's
That equity pays off. Yeah, that equity pays off eventually. You would never say, hey baby, I just popped you out because one day I need you to take care of me, right?
Yes, but do you know what's funny is, do you follow David Henmeyer Hansen on Instagram? Do you know who that is? I don't know who that is. Okay, so he's one of the founders of Basecamp. Ah, okay. I think he's doing okay, so... They're a super private company. They don't have actually any shareholders other than I think Jeff Bezos owns 5% of the company.
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Chapter 6: How does Treehouse measure success in its B2B model?
So we're in the, we're in the glide spot. I was going to say until they turn teenagers. Yeah. Yes. That's what I'm saying. They're cute. Then they're going to get ugly and smelly. So how old are you, Ryan?
I am 40 for the big four. Oh, I love that. All right. Last question. What do you wish your 20 year old self knew?
I wish that I knew it was important to have discipline every day and to not quit on terrible, yucky tasks. I did not have mental strength when I was younger. I wish I would have had that.
Guys, more discipline. Don't quit the tough tasks. This is coming from a guy who literally eight months ago, it's like a black t-shirt. And now he's a full-fledged sales. I mean, pockets. Hold your wrist up. Is there a watch on too? No, no, no. No watch yet. Okay, so he's not a full sales guy yet, but he's- It's a fitted suit though. A fitted suit. fitted suit with the pocket square.
Look, his consumer business, 2 million bucks in ARR, 24 million, sorry, 24 million in ARR. He's letting that glide because he sees the opportunity to change more lives, help more companies, get developers up to speed, train them, you know, bringing their new classes faster on their B2B model.
These are, you know, $90,000 ACV deals, helping MailChimp, you know, folks like this and Vision bring on new developers. The economics are making sense. He did it himself and, you know, onboarding a new sales rep takes about six months, hoping to hit about a million bucks in new ARR per rep. That would be good. Structure is, you know, 50% base, 50% commission.
So they are scaling, hoping that the B2B side passes 4 million bucks in ARR this year and hopefully grows larger than the consumer side by 2020. Ryan Carson, thank you for taking us to the top.
It was a blast. Thank you.
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